Critical Illness Health Insurance

A critical illness health insurance policy provides coverage for specific illnesses that are life-threatening and have very expensive medical treatment or surgical protocols. These could include heart disease, cancer, kidney failure, organ transplants, stroke, etc. 

How do critical illness health insurance plans work? 

To illustrate how critical illness health insurance plans work, let’s take a look at the following example: 

Latha has bought a critical illness health insurance plan and has been diligent in paying the premiums and renewing it every year. One year, she is diagnosed with a critical illness and has to undergo hospitalisation and surgery. The recovery period is a couple of months. The critical illness health insurance plan that she had taken comes in handy at this time. After the 30-day survival period, she receives the sum insured as a lump-sum payout. She uses this for her post-hospitalisation expenses and to tide over the months that she has no salary. This helps to ease her mind and makes her convalescence period that much less stressful. 

The importance of a critical illness health insurance plan 

The rise in lifestyle diseases and healthcare costs have made it almost crucial to have a critical illness health insurance plan, even if you are covered under a corporate health insurance plan or have a general health insurance plan. This kind of health insurance plan provides comprehensive coverage for almost all of the major illnesses and less common ones as well. If you have a family history of any of these diseases, then it is wise to take a critical illness health insurance plan as early as possible.  

A corporate health insurance policy or even a general health insurance policy may cover these illnesses, but still may not provide enough coverage for all the expenses involved. In the event that a person is diagnosed with a critical illness, if they don’t have a critical illness health insurance coverage, they may have to pay out of pocket for several expenses such as medicines, intensive care, etc., which are not covered under the general health insurance. 

This will also be a time when finances take a hit, especially if the person diagnosed with the critical illness is the sole breadwinner of the family. A prolonged illness may result in unemployability for a long period of time. Having a critical illness health insurance plan ensures that your family can focus on your well-being and care and not have to worry about finances. It will also give you peace of mind that goes a long way in helping you recuperate and recover over time.  

Critical Illness Health Insurance Plans Available in India 

The difference between critical illness health insurance and health insurance 

These are the major differences between the two:

Features and benefits of critical illness health insurance 

1. Lump-sum payout: You can use the lump-sum payout in any way you choose, whether to take care of your hospital bills or to take care of your children’s education when you don’t have any other source of income. 
2. Free health checkups: These will ensure that diseases are diagnosed in their early stages itself which will help increase the chances of survival. 
3. Free-look benefit: During the free-look period, you can cancel the policy and get your premium refunded if you change your mind.  
4. Cashless hospitalisation: You can avail cashless hospitalisation at network hospitals that are partnered with the insurer. This varies from insurer to insurer. 

Factors to consider when buying a critical illness health insurance policy 

Before you commit to buying a policy, make sure you compare different policies keeping in mind the following important factors: 

• Sum insured: Ideally, the sum insured should be around 4 to 5 times your annual income. 
• Age of renewability: This should be in the maximum possible range to ensure that you will be covered for a long time. 
• Waiting period: A waiting period that is as short as possible would be ideal. 
• Diseases covered: Should be as comprehensive as possible, including both common as well as uncommon illnesses. There are plans that cover less than 10 illnesses while others cover as much as 20. The more, the better, but again, this is dependent on your family history and lifestyle choices as well. 
• Inclusions and exclusions: It is important to have a clear understanding of what is covered and what is not so that there are no unpleasant surprises later. 
• Sub-limits: There are sub-limits for different expense categories under the sum insured. For example, there could be a sub-limit for Rs.1 lakh for tests and Rs.4 lakh for surgeries under a sum insured of Rs.5 lakh. You would have to take into consideration how much may be required for different categories before deciding on the sub-limits. 
• Survival clause: This is a period of time that the insured must survive after the diagnosis is made in order to be eligible to claim the sum insured. This could range from 30 days to more. 
• In-built coverage: Built-in coverage could be anything from hospital cash and Child Education Benefit and personal accident cover and complementary health checkup. 
• Pre-existing diseases: If you have any pre-existing diseases, it is important to ensure that your policy provides coverage for it. This can differ from insurer to insurer with some companies not providing coverage for pre-existing diseases at all. There are insurers that provide coverage for pre-existing illnesses after the policy has been renewed four times consecutively. 
• Claim settlements: Look for insurers that have a higher claim settlement ratio, shorter claim settlement period, and hassle-free claims process. 

Who should buy a critical illness health insurance plan 

The maximum entry age ranges from 60 to 65 years. Considering that people over the age of 40 are more prone to developing new or chronic illnesses, then any time after the age of 40 would be the right time to buy a critical illness health insurance policy. 

Other individuals for whom this policy would be beneficial would be: 

• Primary breadwinners 
• Those with a family history of critical illnesses 
• Those in high-pressure, stressful work environments 
• Those who don’t have employee benefits to cover a period of recovery after a critical illness   

Inclusions of critical illness health insurance plans 

These are the broad categories of inclusions that you can expect in a critical illness health insurance policy (these can vary from insurer to insurer so read the policy document carefully): 

1. First heart attack of the specified severity 
2. Coronary artery bypass grafting, open chest 
3. Heart valve repair or open-heart replacement 
4. Muscular dystrophy 
5. Motor neuron disease that has permanent symptoms 
6. End-stage lung disease 
7. End-stage liver disease 
8. Multiple sclerosis with symptoms that are persistent 
9. Cancer of a specified severity 
10. Coma of a specified severity 
11. Stroke which results in permanent symptoms 
12. Kidney failure that requires permanent dialysis 
13. Bone marrow transplant 
14. Transplants of any major organs 
15. Bacterial meningitis 
16. Fulminant viral hepatitis 
17. Major burns 
18. Loss of speech 
19. Deafness 
20. Permanent limb paralysis 
21. Aplastic anemia 

Exclusions of critical illness health insurance plans 

These are the illnesses, events, or expenses which are not covered under most critical illness health insurance plans: 

1. Assisted reproduction treatments 
2. Hormone replacement therapy 
3. Infertility treatments 
4. Death within 30 days of the diagnosis of a critical illness or surgery 
5. Any critical illness that is diagnosed within 90 days of the start of the policy 
6. Infection arising from HIV/AIDS 
7. Cosmetic surgeries or dental care 
8. Illnesses that are due to congenital disorders, either external or internal 
9. Critical conditions or consequences arising out of pregnancy or childbirth (including Cesarean sections) 
10. Illnesses arising out of intake of drugs, alcohol, tobacco, or smoking 
11. Treatments in foreign locations 
12. Illnesses arising out of an act of terrorism, war, civil war, or military operations 

Tax benefits of critical illness health insurance policy 

Under Sections 80D and 10 (10D) of the Income Tax Act, 1961, you are eligible for income tax deductions for premiums paid and for the lump-sum payout. 

Documents required when applying for a critical illness health insurance policy 

These are the documents you may need when applying for a critical illness health insurance policy: 

1. The proposal form, accurately filled 
2. Proof of income (salary slips, bank statements, IT returns, or profit & loss statements) 
3. Proof of address (bank account statement or electricity bill can be provided as proof) 
4. Proof of identity (can be Aadhaar card, PAN card, driving license, voter ID) 
5. Proof age (can be birth certificate, passport, PAN card, driving license, school or college certificate)  

Documents required when raising a claim 

These are the documents required when requesting an initial claims assessment: 

1. The claim form, accurately filled in and signed 
2. For critical illnesses caused by an accident, the accident’s FIR copy 
3. Initial consultation letter and all subsequent prescriptions 
4. Medical certificate that confirms the diagnosis of the critical illness 
5. KYC (Know Your Client) documents 
6. Medical and/or pharmacy bills with the prescriptions given 
7. Discharge card or death summary, as applicable to the case 
8. An attending medical practitioner’s medical certificate, investigation reports, and other results authorising the claim, showing that it is not related to any pre-existing condition, injury, or illness 
9. Specific critical illnesses may have different documents required 

FAQs 

1. Which is better, a separate critical illness health insurance policy or a critical illness rider along with my general health insurance? 
2. A rider may provide coverage for the same illnesses that are covered under an individual critical illness policy, but the sum insured may not be sufficient to cover all expenses. The reason for this is that a rider is dependent on the sum insured of the base policy, so if the base policy is for Rs.5 lakh, the rider only provides coverage for Rs.5 lakh. However, with a separate critical illness policy, the sum insured can be chosen without any limits by the policyholder which should be enough to cover all expenses. 
3. Can I raise claims for multiple illnesses at the same time? 
4. This depends on the insurer, but for most, you can only raise one claim at a time for one illness from the specified list. As soon as your claim is approved, the lump-sum is paid out to you and the policy is terminated. This can later be renewed. The expenses for hospitalisation are paid under health insurance. After the survival period is over, the lump-sum is paid out under the critical illness cover. 
5. How is the premium calculated? 
6. The premium is calculated based on the applicant’s age, policy tenure, sum insured, and health status. 
7. During the policy tenure, can I make a change in the sum insured? 
8. No, it is not possible to make a change in the sum insured when the policy is already in force but it can be increased when the policy is renewed. 
9. Is it possible to buy a critical health insurance policy online? 
10. Yes, this can be done easily on the website of the insurer. 
11. How do I decide which is the best insurance company for a critical illness health insurance policy? 
12. There are many factors to look into many of which have been listed above. However, the Incurred Claim Ratio is an important factor in determining how hassle-free and prompt the insurer is in settling claims. 
13. What is Restore Benefit? 
14. Restore Benefit is a feature whereby your sum insured is restored if it is exhausted during the tenure of your policy. This feature may not be available with all insurers but is a useful feature to have in your policy. 
15. Is co-payment possible in a critical illness health insurance? 
16. Yes, co-payment is possible and depends on the insurer.  
17. What if I forget to renew my policy? Will it get terminated permanently? 
18. You will be sent reminders to renew your policy but in case you still forget, you are given a grace period of up to 30 days (depending on the insurer) to renew your policy. 
19. How much can I avail in tax benefits on premiums paid? 
20. For individuals below 60, the maximum tax benefit is Rs.25,000 while for those above 60, it is Rs.50,000.  
21. Are non-allopathic treatments covered? 
22.        Some, but not all, insurers provide coverage for non-allopathic treatments as well. 
23. What are the most common critical illnesses? 
24. The most common critical illnesses in India are heart attack, cancer, and stroke. 
25. What is the maximum sum insured that I can get? 
26. Depending on your income and other factors, your sum insured can be up to Rs.1 crore. 
27. What is the minimum sum insured that can be availed? 
28.        The minimum sum insured is Rs.1 lakh across insurers. 
29. Is there a grace period for making premium payments? 
30. Yes, most insurers do provide a grace period for making premium payments which can be in the range of 15 days or more.